Arm and Instacart could help break Wall Street's IPO losing streak

RV_ · September 8, 2023

Good news for investors.

Excerpt:

"A blockbuster initial public offering from SoftBank Group’s Arm Holdings is fueling optimism on Wall Street that an IPO logjam could finally break open after a two-year drought.

The one bank that needs that to happen most is in a prime position to benefit: Goldman Sachs (GS).

Goldman is one of several big banks behind Arm’s offering, which is expected to happen next week and be the largest since electric vehicle maker Rivian Automotive (RIVN) went public in November 2021. Arm designs microchips for phones and tablets.

'What is the normal?'

The lineup of IPOs is happening just in time for Wall Street, which is suffering from an extended dealmaking slump that followed a boom in 2021.

Clients turned cautious about everything from the direction of interest rates to relations with China to the larger US economy, dampening the optimism needed to go public, buy companies, or take on more debt.

Firms across Wall Street slashed bonuses and staff, announcing cuts of roughly 20,000 jobs since the end of 2022.

"We've had a moment of clarity, where we realize that trees don't grow to the sky," said Donna Hitscherich, a senior lecturer at Columbia Business School and former investment banker. "There is going to be a new normal, but what is the normal?"

Thus far the freeze has failed to thaw in 2023, which has been the worst for IPOs year to date since 2016 as measured by deal volume, according to data provider Dealogic.

This current quarter is no different thus far, although most of the activity during third quarters tends to happen in the final month of September.

'Risk-on sentiment'

No bank is in more need of some good news than Goldman, which is under an extreme microscope in 2023 as CEO David Solomon wrestles with everything from partner unrest to concerns about strategy as he tries to put a consumer banking experiment behind the company.

Its investment banking revenues were down by 20% in the second quarter, which trailed performances at JPMorgan, Morgan Stanley, and Bank of America.

The drop at Goldman was worse than expected and contributed to a 58% pullback in profits across the firm.